Pacific Currents

Juan Navarro
Associate Faculty, Royal Roads University

Global value chains (GVCs) have been at the center of attention in both business and policy spheres around the globe for the past two years. Disruptions created in GVCs as a result of operational inefficiencies were only magnified by the COVID-19 pandemic. The discussions happening worldwide on the relevance of GVCs have allowed us to see how closely the world is interconnected via GVCs and how quickly local events can become a global matter, resulting in thousands of SMEs getting pushed out of business.

Global value chains have a critical role in the world economy and in our daily lives, representing more than two-thirds of global trade, providing essential products and services, and supporting jobs across a diversity of economic sectors ranging from agricultural and natural resources to traditional and high-tech manufacturing and a vast and diverse list of services.

While the ongoing discussions on GVCs have produced worthwhile conversations by creating more awareness and a better understanding of their relevance, we cannot deny that these discussions are not enough to remedy future disruptions that might happen as a consequence of new contingencies. Nor can they support efforts to build more resilient value chains after COVID-19.

Christopher Findlay, Honorary Professor of Economics at the Crawford School of Public Policy, the College of Asia and the Pacific, The Australian National University; Vice-Chair, Australian National Committee for Pacific Economic Cooperation

Fukunari Kimura, Chief Economist of the Economic Research Institute for ASEAN and East Asia (ERIA) and Professor of Economics at Keio University.

Shandre Thangavelu, Vice President of the Jeffrey Cheah Institute on Southeast Asia at Sunway University and Regional Director Southeast Asia at the Institute for International Trade, University of Adelaide.

COVID-19 has sent shock waves running up and down global value chains (GVCs). Social distancing and high levels of uncertainty have caused a significant drop in demand for goods, with GVCs carrying the economic shock through supplier economies. 

Recovery from the shock is anticipated once COVID-19 cases fall below a certain level, but financial fragility are likely to linger from the large negative wealth effects caused by the pandemic. Several stages of fiscal and monetary policy stimulus are likely to be introduced over the coming months across many economies.